Does PAST price action determines future price action?

[TraderABC]

Originally Posted by tommyfx

"But FX ticks are not based on people's supply demand."

So are you suggesting that if there is a 1 billion dollar buy order (therefore demand) for euro at 1.2000, this will not have an effect on price and it won't therefore rise.
Or a billion dollar sell order at 1.9990 wont cause the price to free fall from this long held support?

"The price is where it is ideal for (banks,government,country's economy,exporters/importers) needs."

Yes this is very true, however they dont do this by not just not moving the price to an area that doesn't suit them they spend billions each day maintaining certain levels, thus causing demand, i can't remember the exact figure but the bank of england spends billions each day from stopping GBP diminishing too much as do all other countries.

Not every order can go through. And notice the line that I have bolded. The Banks change the rate of currencies with little if any stuff from other large players. "Spending Billions" can mean many things, such as exchanging them for other currency or changing monetary supply, etc.

Remember YOUR orders do not go to interbank level they stay at your brokers, thus you cannot affect the markets.

[TraderABC]

Originally Posted by Nonpiker

TraderABC your assesment of FX price action is really inaccurate. Banks do not set rates

WHOSE rates does your broker gets? The banks. What organization is responcible for financial stuff? Federal Reserve, and big banks.

they are set via supply and demand in a free floating currency. People dont move markets?

There were PLENTY of cases where the currency has misbehaved, when it has went in totally different direction than what normal people would do. Where were these people? Who in their right mind would be selling when interest rates have gone up?

Another point. Why do all of the major banks have same data feed?

I can think of one person that comes to mind...Soros for example...
You dont think Warren Buffet selling 21 billion $'s in forwards has any impact when the dollar was getting hammered last year?

When you have that much money, you'd probably get a special tratement from banks, dont you think?

The price is ideal for exporters?

It needs to be constantly adjusted and obviously it does not remain static. Same with importers, pension funds, tourism, etc.

That is why you run into exporter offers in usdjpy above the market and importer bids below? The price is set to ideal rates? There is central bank intervention so the price can stray from the ideal. I am not sure where you are coming up with this stuff.

Market psychology is 100% applicable. The perfect example can when the usd was unwanted last year and everyone so dollars any way. Now people ignore the bad data (trade deficit for example) and continue to buy dollars anyway.

Whose psychology? People with billions of dollars are different from us. Our little sub mil orders dont even get to the interbank level, so who are you talking about?

[Nonpiker]

Trader ABC,

I happen to trade the interbank market directly on a professional level. I do not trade retail fx at the moment. The Federal Reserve does not intervene in the markets on a daily basis. Big banks do not set rates their customers do by buying/selling through them. EURUSD's rate is set basically by EBS, which is the primary paltform it is traded on. The rate at anytime is determined by the current bid and offer in the marketplace.

The FX markets are dominated by corporate flows. That is where the vast majority of volume comes from. Corporations do not necessarily take into account interest rate differentials when conducting business. If a large US corporation is doing a M&A deal in Japan they need to sell dollars and buy yen regardless if rates are rising.

What does having the same data feed have to do with anything?

What does preferential treatment to Soros or Buffet have to do with there ability to move markets? So much for Buffets preferential treatment...he has gotten killed on his currency plays.

[narafa]

Originally Posted by Nonpiker

Trader ABC,

I happen to trade the interbank market directly on a professional level. I do not trade retail fx at the moment. The Federal Reserve does not intervene in the markets on a daily basis. Big banks do not set rates their customers do by buying/selling through them. EURUSD's rate is set basically by EBS, which is the primary paltform it is traded on. The rate at anytime is determined by the current bid and offer in the marketplace.

The FX markets are dominated by corporate flows. That is where the vast majority of volume comes from. Corporations do not necessarily take into account interest rate differentials when conducting business. If a large US corporation is doing a M&A deal in Japan they need to sell dollars and buy yen regardless if rates are rising.

What does having the same data feed have to do with anything?

What does preferential treatment to Soros or Buffet have to do with there ability to move markets? So much for Buffets preferential treatment...he has gotten killed on his currency plays.

A large US corporation won't think about making a M&A deal in Japan when interest rates of USD are increasing and are stall in Japan, simply because it would be much more attractive to invest in an expanding US economy than investing in the stagnant Japanese one. Interest rates do affect currencies rates, and they do that on the level of corporations.

You will notice very very few times that currency rates went against interest rates logic. Such times might be disasters, special cases such as the USD/CAD for the past 2 years, mainly because the Canadian economy is heavily tied to precious metals, and so on. But in general, the interest rates define the long term trends of currencies, this is a major fact, and no body can ignore it.

Thanks,

Nader

[narafa]

Originally Posted by tommyfx

"But FX ticks are not based on people's supply demand."

So are you suggesting that if there is a 1 billion dollar buy order (therefore demand) for euro at 1.2000, this will not have an effect on price and it won't therefore rise.
Or a billion dollar sell order at 1.9990 wont cause the price to free fall from this long held support?

"The price is where it is ideal for (banks,government,country's economy,exporters/importers) needs."

Yes this is very true, however they dont do this by not just not moving the price to an area that doesn't suit them they spend billions each day maintaining certain levels, thus causing demand, i can't remember the exact figure but the bank of england spends billions each day from stopping GBP diminishing too much as do all other countries.

And how much will the 1 Billion dollar buy order move the market ?? Not too much probably, just a few pips, merely not more than 15 to 20 pips max. The market is too huge to be affected dramtically by a 1 billion order. Another fact, is that nobody will place a 1 billion buy order as a single block, he will probably break it down to small moderate pieces of say 200 millions an order. When you want to enter the market that large, you want to be as anonymous as possible, all professional traders do this, because if you picked up the phone and called your broker or bank to place a 1 billion order, the next 5 minutes after your order have been executed, half of the worlds' traders will know about it and know who is having this position now. In a sense for professional traders, you are losing an edge, because you are giving the market and the traders out there more information. Professional traders don't like this, because it can turn against them. For example, Warren Buffet banged the world by saying that he is bearish on the USD and Bullish on the GBP early this year. Other Pros who don't share him the same opinion, will try to spot when is he going to probably enter his positions, and they will consider these entries as huge pullbacks, in which they will be selling the GBP at and buying the USD at.

Also keep in mind that the 1 billion dollars you are talking about will have a small effect on the daily or weekly chart and you will merely identify it as a correction to the major trend.

It's all a supply and demand game. Which currency does the people want to own the most and which is the one that people don't want to own??

Thanks,

Nader

[pipscooper]

Originally Posted by BullMarket

Moving averages are very good indicators of trend but, they fall short in choppy market condition , They can give you a good indication of where the market is going to go once a trend is in place. After all trend in motion is likely to continue.

If you had poor performance with them it was in your application of them. Ed Seykota, used them as a cornerstone of his trading strategy. He, as you may know, realized a 250,000% return on his accounts over sixteen years.

You have to realize your dealing with human behavior and psychology , which dose repeat, and is roughly quantifiable, just ask any psychologist. It’s never 100% accurate, it’s only probably. So, dose past price action predict future price action? Probably.


-Frank

I would agree that averages are good at identifying PAST trend, however I don't agree that they are good at identifying either PRESENT or FUTURE trend, any better than random. I have done Monte Carlo testing against random trades and found this to be the case. It doesn't sound like you have tested your opinions. It is not that hard to test this with Monte Carlo simulation - it can be done in Excel on past data. Because of how relatively easy it is to statistivally prove that averages don't perform any better than random, there is really no reason not to take the time and do the tests yourself.

http://www.moneytec.com/forums/showt...452#post146452

[metal]

Originally Posted by TraderABC

Hi all.

Does past price action in any way shape the direction of future price action?

Lets brainstorm, are there any ways to check this? Any ideas? Indicators, etc?
thank you!

They do not determine the future price action. They only give a hint where the prices may be heading. Thats slightly better than gambling.

[BullMarket]

Ok listen up people. I’m going to make this real simple.



If you do any of the following you believe, past price action will determine future price action:

1) Use charts.

2) look at price.


You do not if you:


1) Use only fundamentals.


2) Trade totally at random using only money management.



3)


Choose your path.

Feel free to add to the list.

-Frank